Wednesday, September 26, 2012

Promoting Obfuscation of What Government Does and Doesn’t Do To Give The Private Sector (Including Ratner) More Credit

This is a necessary follow-up to two earlier Noticing New York articles about the trouble the MTA has gotten into with corporate advertising and branding, something the MTA is scheduled to evaluate and take public comment about tomorrow morning at 9:30 AM (details below).

Confusion When the Government Is Enmeshed In Corporate Advertising

The main problem when government gets enmeshed in advertising, lending out public assets as vehicles for corporate advertising and corporate promotion, is that it obfuscates what government does and doesn’t do.

Notwithstanding how promotional advertising images are seemingly plastered everywhere in the transit system these days, anyone who thinks that corporate advertising and promotions pay for any substantial portion of government services isn’t keeping track of their decimal points. The public pays for virtually all of what government provides; in the MTA’s case that's more than 99%.

And then there are the questions about whether government is endorsing any of these ubiquitous messages that appear rampantly on the public's property. . .

. . . Does the MTA endorse promotion of the Barclays Bank, virtually synonymous with the LIBOR scandal in connection with which the MTA, amongst other New York government entities, may be suing Barclays for losses? The MTA has deeply subsidized the Ratner/Prokhorov “Barclays” Center basketball arena that promotes that bank’s name and the MTA has named two subway hub stations in Brooklyn after the bank. No! The MTA says that it similarly disavows such promotion of the bank. . . .

As I have made the point before, (also here), government’s surrender to advertising evidences a lack of self-respect, particularly when it means that appropriate credit is not given to government for what it does. When government surrenders to messages and promotions that clearly need to be disavowed, such as promotion of Barclays Bank, then the abject lack of self-respect stands out in even starker relief.

But the willingness of government to prostrate itself in making the corporate sector look good at government’s expense may be even more pervasively ingrained. It appears to extend beyond just awkward images that result when handing over public assets for an advertising fee.

The Daily News article, which was an exclusive, appeared before the newspaper announced (on the day of the ribbon-cutting) that it had entered into a sponsoring partnership with the developer/subsidy collector so that the plaza outside the “Barclays” arena will be called the “Daily News Plaza.” Examining how so-called “news” organizations prostrate themselves and become unquestioningly complicit in the promotion of real estate developer schemes is a subject for other articles. This article is about the disrespect government shows itself with such prostration.

The September 13th Daily News article featuring Mr. Lhota was essentially about that just-mentioned plaza outside the arena in that it focused on the completion of the subway entrance in the center of the plaza.

Daily News' Astounding Claim

The article prominently made an astounding claim lauding Forest City Ratner, the developer/subsidy collector (see the screen-shot below- click to enlarge). It’s a statement about the new subway entrance that shortchanges the government:

It cost $76 million. No, it’s not paved in gold. But not a cent of it came from taxpayers’ pockets.

“It cost $76 million” and “not a cent of it came from taxpayers’ pockets”? That sounds absolutely too good to be true, and it is. As we are all supposed to know by now, when you hear something that is `too good to be true’ you are almost certainly on the other end of a con. The government has paid plenty to Forest City Ratner, far more than the value of the supposedly “free” $76 million subway entrance. The developer has collected all sorts of subsidies: Hundreds of millions in direct cash, write-downs on the value of land it’s getting from the MTA, donation of free streets, avenues and sidewalks, being excused from real estate taxes, . . . the list goes on and it amounts to a substantial net loss for the public. All told, Forest City Ratner is looking to walk away with subsidies totaling $2 - $3 billion. And construction of a subway entrance in all of this is somehow counted by the Daily News as a free gift from the developer?

But shifting credit due to government to the private sector is the very theme of the article in which Mr. Lhota was collaborating to produce. Below, see the article’s picture of Mr. Lhota at the site.

Mr. Lhota’s words in the article extol the benefit of private-public partnerships, with Mr. Lhota using the opportunity to promotionally “give Ratner credit” for what government paid for.

The reporter writes:

From the MTA’s perspective, the station marks the kind of public and private dealmaking that attempts to place the city and its people first.

This is followed by Mr. Lhota’s words:

“There is a real disconnect in this country between real estate and mass transit,” says Joseph J. Lhota, chairman and CEO of the MTA. “In Asia, the mass transit companies are real estate companies. They build mass transit around big developments in order to enhance the value in the area. I give Ratner credit. This is part of a 30-year vision for downtown Brooklyn — MetroTech, Atlantic Yards and now Barclays. The job growth in downtown Brooklyn leads the entire city. How long are people going to criticize this project before they realize this is good for New York City?”

So that means Mr. Lhota is backing Ratner’s government-assisted mega-monpoly over Brooklyn’s key subway lines, more than 50 acres of monopoly, with 30+ contiguous acres extending out from the arena site! And one way he is promotionally backing it even more is through the article's denial of the resources the government committed in bringing this about.

Altering Public Opinion?

While the article indicates that there is unfavorable public opinion of the Ratner mega-mopoly it credits Mr. Lhota with knowing how to use the tactics of private-public partnerships to alter public opinion in Mr. Ratner’s favor. It says Mr. Lhota:

. . knows the only way to change public opinion is with repeated successes.

. . . repeated successes that are paid for by the government without acknowledgment.

Private-Public Partnerships As Morally Suspect

In contradistinction to Mr. Lhota, renowned urbanest and thinker Jane Jacobs viewed private-public partnerships as suspect arrangements. Her 1992 book, “Systems of Survival: A Dialogue on the Moral Foundations of Commerce and Politics,” has probably not gotten the attention it deserves. In it she argues that mixing of government and business tends to result in a degradation of fundamental moral systems and principles. With such intermixtures, government officials reorienting themselves to serve business interests are prone to forget that they are supposed to perform an essential guardian role protecting the public interest first, foremost, and above all else.

Conversely, according to Jacobs, businesses acting with the force of government behind them become less honest, less collaborative, less respectful of contracts, a whole host of problems. Jacobs’ book includes an entire chapter on what she refers to as the “monstrous hybrids” of morality that evolve when the properly separate moral systems of government and business get improperly mixed. (If the proof is in the pudding, Atlantic Yards does seem to have collected a complement of people of very sketchy morals.)

Falsification of Costs With Subsidies

Another point that interrelates in a key way: Jacobs was also wary of subsidies. She expressed this in her 2000 book, “The Nature of Economies.” That book was written as a follow-up to “Systems of Survival” and, like it, is in the form of a Platonic dialogue between characters that explores ideas that are clearly Jacobs’ own, including the following:

. . . . An oddity of the Soviet System was that the costs of most production and services were unknown. Really unknown. Managers of factories, offices, farms, mines, hospitals, Theaters, whatever— they literally did not know the costs of what they were producing. Budgets existed, to be sure— allocations of expenses— but these were so infused and confused by subsidies that they bore little or no relation to actual costs. Cost accounting didn’t matter in any case, because prices were fixed by edict.

So, although Mr. Lhota may be waving the banner of free enterprise when he extols private-public partnerships, as Jane Jacobs would see it he is really promoting a system that has more in common with the Communism of the old Soviet Union.

Russian Problems Persist

In Jacobs’ estimation post-Soviet Russia doesn’t handle things any better. The country is:

. . as cavalier about costs and prices for quite different reasons . . . Russian enterprises still ignore cost accounting. Their people don’t know how to do it, and they don’t seem to learn, because they evidently don’t understand its importance as guidance to what they are doing well and what they’re doing badly. Monopolies, established by cronyism and strong-arm methods, along with pervasive extortion and corruption, falsify actual cost anyhow; racketeering enterprises prefer eliminating competitors to competing with them on prices, quality and services.

No wonder Bruce Ratner and Russian Oligarch Mikhail Prokhorov feel comfortable with each other as partners.

What About Falsification of Benefits? Like Jobs?

Jacobs mentions that costs are falsified when they are fixed by “edict.” She might also have said that benefits in these situations are similarly likely to be false or “pretend” figures. It sort of parallels the symmetry of the Soviet era joke Jacobs quotes in “The Nature of Economies”: “We pretend to work and they pretend to pay us.”

When Charles Bagli, the principal real estate reporter for New York Times, was asked Monday on the Brian Lehrer show about how the Atlantic Yards mega-project was doing in terms of creating jobs he began by saying:

First of all, when I cover these kinds of developments I try to avoid using the numbers because they can be very misleading or very concocted. . .

Notwithstanding that the numbers are so misleading and concocted that the New York Times reporter, who is probably best qualified to know, doesn’t think they should even be reported, there are all sorts of extraordinary numerically stated exaggerations “thrown about” by all sorts of people, including politicians like Senator Charles Schumer, as the reason mega-projects like these should proceed. Based on the theory of these benefits that couldn’t be quantified in real numbers Ratner was allowed to wipe out his competitors with eminent domain.

In “The Nature of Economies” Jacobs argues that instead of clearing the deck with eminent domain abuse to benefit the likes of monopolist Bruce Ratner, real economic development is based on fostering economic ecosystems of complex, naturally evolving, diverse ensembles, which she sees as being at the root of real qualitative development:

. . . the richest— which means the most expanded— economies are diverse economies. The practical link between economic development and economic expansion is economic diversity.

In Jane Jacobs’ last completed book, “Dark Age Ahead” (2005), she envisioned a future where our civilization might not have survived and wondered what advice people looking back from ten thousand years in the future might be able to offer, with hindsight, as to what “could have forestalled fatal deterioration of the wonderful North American culture.” She suspects that the advice would be this:

“Let things grow. Don’t let currently powerful government or commercial enterprises strangle new departures, or alternatively gobble them as soon as they show indications of being economic successes. Stop trying to cram too many eggs into too few baskets under the keeping of too few supermen (who don’t actually exist except in our mythos).” If people of the distant future care sufficiently and have sufficiently good documentation, they might note that an American president named Theodore Roosevelt, who portrait likeness they could still see, carved into Mount Rushmore, had staved off destructive corporate cannibalism for about a crucial half century before it was loosed in the 1960s and intensified in the 1980s.

Back To Private Sector Promotions On The Government's Dime

In getting into a description of why monopolies are bad in general (and they are), I have let this article stray a trifle from what is intended to be its main point: That government acts with a demeaning lack of self-respect when it is willing to prostrate itself to make its corporate sector private partners look good at government expense. The false accountings one sees in Mr. Lhota’s Daily News article also intentionally confuse the issues of how much is lost and how little gained with these mega-projects.

I started by describing the problem the MTA is scheduled to evaluate and take public comment about at tomorrow morning's meeting: The difficulties presented when government gets enmeshed in lending out public assets as vehicles for corporate advertising and corporate promotion, and how that creates confusion about what government really does and doesn’t do, and the difficulty in making clear what government is or is not endorsing. But these concerns are part of a bigger problem: What kind of world are we confronting when the government consistently acts as if its own interests and those of the public are inherently subservient to promoting the image of big private sector corporations over less flattering realities?

The MTA may have stated that despite the very substantial resources it has committed behind the “Barclays” campaign it doesn’t, in fact, endorse the Atlantic Yards promotions of Barclays Bank. But what about the bigger picture: The MTA’s participation in a Daily News article that promotes Forest City Ratner with the howler that the construction company is handing out subway station construction projects at zerocost to the taxpayers? That's an interpretation that is only possible when government collaborates in a public relations charade about the real numbers.

Keeping track of the real bottom line, the real cost of things, is essential. Mr. Lhota was once the Budget Director for the City of New York. Presumably he knows exactly how to keep track of the bottom line . . . and he ought to do that.MTA Board Meeting To Evaluate MTA Involvement Supporting Corporate Promotions

The issue of MTA advertising and promotions are to be considered at its board meeting tomorrow morning, where the public will be permitted to address the MTA directors on the subject:

Public Speaking Procedures
•
Registration opens 15 minutes before scheduled start of committee
meetings and 30 minutes before the start of each board meeting.
• Registration must be done in person.
• Statements must be about agenda items only.
• Two minute speaking limit.
• Speaking time may not be transferred.

About Me

NOTICING NEW YORK & NATIONAL NOTICE are both independent entities managed by Michael D. D. White of Hop-Skip Enterprises. Michael D. D. White is an attorney, urban planner and former government public finance and development official. *** Noticing New York covers New York development and associated politics. National Notice covers national policy and economic issues *** Contact: MichaelDDWhite(at)gmail.com